Planning to Step Back or Exit Your Business? Here’s What You Need to Consider

At some point in time, all business owners will want to start stepping back from day to day business operations for things like retirement, pursuit of other ventures or just that lifestyle choice or work-life balance that we have all heard about but never quite seem to achieve. Alternatively, you may be looking to sell your business and want to be sure that when someone else takes the reins, and you are no longer there, your business continues to function as normal. One other aspect that few of us plan for properly, is what would happen to your business is you became ill for an extended period of time or died unexpectedly.
This is where you need a ‘Succession Plan’. This is a plan that maps out the details of the things that need to be put in place as you ease back from the business, or how things will run if you make a clean break from your involvement as an owner. There are a number of key things that you need to address as part of your succession plan that should help minimise disruption in the business and ensure a smooth transfer of ownership. Though the reason from documenting a succession plan may vary, the following list of considerations should help you navigate through the process and ensure that those relevant to your situation are adequately covered.

Firstly, decide which of the following reasons for developing a succession plan you are most concerned about:

Sale of the business

Stepping back from the business and leaving current management to run it

Forward planning for a sudden exit such as illness or death

Secondly, determine whether you want to include options for the following:

Sale of the business to an external party, or to your existing management (management buy-out)

Handover of the business to a family member or a non-family member

Whether a sudden departure of yourself from the business would allow for a handover to existing management (or family member) or would require a sale of the business to a new owner

Finally, some of the key items to consider including in your succession plan are:

The market value of your business if you plan to sell it and how will you approach and manage the sale process

What skill set the new owner will require to be actively involved in running your business

The tax and financial implications of any business sale

What personal guarantees do you have in place relating to the business

What changes need to be made to your insurance policies

Whether your management team structure is appropriate to support a new owner (do you have family members in the business that will not remain once the business is sold)

Your business plan and financial forecasts to give new owners a clear direction to take the business

The time period required for you to do the required handover

Documentation of operational processes and procedures

Employee contracts – are they up to date

Plant and equipment – is it in good working order

Suppliers and customers – do the changes have to be communicated to them, and if so how

Legal implications: do you have a will in place that needs to be updated or dictates the terms of your succession plan

Additional training that your management team may require while you are still in the business

Internal communication within the business about your succession plan

Identification of key personnel and incentives for them to stay (if required)

Are you in a partnership or have multiple shareholders who will have first right of refusal over your shares if they are being sold or transferred

If you want a successor from within your family, who will it be and will they want the responsibility

If you need help with developing your succession plan please contact one of the team at SV Strategic Solutions on 1800 246 801.